Saudi Arabia showing signs of economic distress with low oil prices

The instability of oil prices in the last two years has meant bad times for many countries, especially those who are reliant on OPEC to interfere with the supply dynamics, suffering grave economic consequences as a result of lower but much needed revenue streams.

Chief culprit in the deliberate cascade of surplus oil finding its way into a demand-waning market has been Saudi Arabia whose steadfast conviction in budging out fresh competition cannot be discounted from the levels its gone to in ensuring difficulty for the newcomers entering a state of profitability.

However this hasn't come without cost as the world's largest exporter of oil has used its de facto position as leader of OPEC to influence market dynamics most often to the detriment of all parties involved in the collusive agreement with the economic pinch now hurting Saudi's fiscal budgetary plans that lie in jeopardy.    

As austerity bites in #SaudiArabia, a testing time for its prince https://t.co/M4e0hxNYTm @gccarey1 @DeemaAlmashabi pic.twitter.com/QYWEr9BRB8

— Javier Blas (@JavierBlas2) August 17, 2016

Probably the biggest reason for the US having a propensity to seek out alternative forms of energy stemmed directly from the fluctuant state of affairs in most OPEC countries that's dictated supply to the rest of the world meaning less control by external forces.

In turn Saudi Arabia and many of its counterparts have used the abundance of this scarce commodity as a strategic resource used to distribute prosperity to its citizens instead of allowing the free market to concentrate the wealth in the hands of a few greedy individuals. As commendable as this societal approach might sound it requires a domineering government administration which on most occasions involves a suppression of its citizens instead of their liberation.

Such has been the case in the kingdom of Saudi Arabia where its citizens have been fed with state benefits for many a decade in exchange for implicit support for its monarch. But this understanding is coming under threat as the war on oil price heats up and the longevity of extensive means of action in place extended further into the future than intended.

The flummoxed leaders of Saudi Arabia hadn't bargained for the length of time needed to eliminate competition, a goal that's hardly given any relief to the flourishing inventory of oil sitting in storage. Just last week I wrote a piece detailing Riyadh's efforts to fight back at US shale gas producers and went on to say that its plan had lost the definition of being a short term dilemma and had begun moving into the realms of longer term risks disturbing the forced order.  

Prince Mohammed bin Salman, the youthful deputy crown prince and second in line to the throne has been vocal about his radical plan to shape Saudi Arabia from its over reliance on oil as a main component in its economy to a more diversified spread of sectors as a bold change needed to secure its future although his arrogance and lack of diplomacy regarding leniency to fellow OPEC members in recovering economically from a global trade hiatus (the member being Iran) hasn't won him over many friends.

Backed into a corner, Salman needs to tread the waters carefully so as to not upset the kingdom's standing with its people but at the same time wastefully spend its time fighting a price battle that will presumably end up with the free market gaining some sort of control over oil supplies. If he isn't successful in convincing Saudis of his grand plan the country could very well see unrest descend into its streets and the power of the monarch stripped from its existence.